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Dr. Reddy’s Q1 FY12 Financial Results

Key Highlights

  • Consolidated revenues are at Rs. 19.7 billion ($444 million) in Q1 FY12 versus Rs. 16.8 billion ($377 million) in Q1 FY11, year-on-year growth of 18%.
    • Revenues from Global Generics for Q1 FY12 are at Rs. 14.4 billion ($323 million). Year-on-year growth of 21% mainly driven by North America generics and Russia.
    • Revenues from PSAI are at Rs. 4.8 billion ($108 million) in Q1 FY12, growth of 7% over previous year.
  • Adjusted* EBITDA of Rs. 4.3 billion ($97 million) in Q1 FY12, is at 22% of revenues recording year-on-year growth of 27%.
  • Adjusted** Profit after Tax for Q1 FY12 is at Rs. 2.5 billion ($56 million), is at 13% of revenues with year-on-year growth of 20%.
  • During the quarter, the company launched 39 new generic products, filed 31 new product registrations and filed 9 DMFs globally.

*Note: Adjustments to Q1 FY12 includes a one-time charge of Rs. 136 million ($3 million) on account of a Voluntary Retirement Scheme (VRS) floated by the company

**Note: Adjustments to Q1 FY12 includes: a) interest on bonus debentures of Rs. 117 million ($3 million); b) a one-time charge of Rs. 136 million ($3 million) on account of VRS; c) tax normalized to annual tax rate

All figures in millions, except EPS
All dollar figures based on convenience translation rate of 1USD = Rs 44.59
Dr. Reddy’s Laboratories Limited and Subsidiaries
Unaudited Consolidated Income Statement
Q1 FY12 Q1 FY11
Particulars ($) (Rs.) % ($) (Rs.) % Growth %
Revenue 444 19,783 100 377 16,831 100 18
Cost of revenues 207 9,228 47 178 7,917 47 17
Gross profit 237 10,555 53 200 8,914 53 18
Operating Expenses
Selling, general & administrative expenses 151 6,756 34 123 5,482 33 23
Research and development expenses 27 1,197 6 22 993 6 21
Other operating (income) / expense (4) (186) (1) (4) (186) (1) 0
Results from operating activities 63 2,789 14 59 2,625 16 6
Net finance (income) / expense 1 46 0 4 177 1 (74)
Share of (profit) / loss of equity accounted investees (0) (4) (0) (0) (5) (0) (20)
Profit / (loss) before income tax 62 2,747 14 55 2,453 15 12
Income tax (benefit) / expense 3 120 1 8 357 2 (67)
Profit / (loss) for the period 59 2,627 13 47 2,096 12 25
Diluted EPS 0.35 15.5 0.28 12.3
Profit Reconciliation:
Adjusted EBITDA Reconciliation Q1 FY12 Q1 FY11
($) (Rs.) ($) (Rs.)
PBT 62 2,747 55 2,453
Interest 5 221 (0) (9)
Depreciation 19 828 15 685
Amortization 9 405 6 288
EBITDA 94 4,201 77 3,417
Adjustments:
One-time charge of Voluntary Retirement Scheme 3 136
Adjusted EBITDA 97 4,337 77 3,417
Adjusted PAT Reconciliation Q1 FY12 Q1 FY11
($) (Rs.) ($) (Rs.)
PAT 59 2,627 47 2,096
Adjustments:
Interest on Bonus Debentures 3 117
One-time charge of Voluntary Retirement Scheme 3 136
Tax normalized to annual tax rate (8) (360)
Adjusted PAT 56 2,519 47 2,096

Segmental Analysis

Global Generics

Revenues from Global Generics segment are at Rs. 14.4 billion ($323 million) in Q1 FY12 registering growth of 21% over previous year.

  • Revenues from North America at Rs. 5.8 billion ($129 million) in Q1 FY12 versus Rs. 3.9 billion ($87 million) in Q1 FY11. Growth in USD terms of 51% led by new product launches in the last twelve months and market share improvement in key products – tacrolimus, lansoprazole, omeprazole Rx, omeprazole Mg OTC and fexofenadine OTC.
    • 9 new products launched during the quarter. This includes 4 SKUs from our Bristol penicillin facility. Other new prescription launches includes letrozole, levofloxacin, venlafaxine-XR, donepezil and topotecan injection.
    • Benefit of initial uptake of OTC launch of fexofenadine in Q1 FY12.
    • 22 products of our prescription portfolio feature among the Top 3 ranks in market shares. (Source: IMS Sales Volumes May 2011)
    • During the quarter 3 ANDAs were filed. The cumulative ANDA filings as of 30th June, 2011 are 180. A total of 76 ANDAs are pending for approval with the USFDA of which 36 are Para IVs and 11 are FTFs.
  • Revenues in Russia & Other CIS markets at Rs. 3.0 billion ($68 million) in Q1 FY12 versus Rs. 2.6 billion ($57 million) in Q1 FY11, year-on-year growth of 18%.
    • Revenues in Russia at Rs. 2.5 billion ($56 million) in Q1 FY12 versus Rs. 2.1 billion ($46 million) in Q1 FY11, year-on-year growth in USD terms of 23%, largely driven by volume growth in key brands.
      • Significant growth in OTC portfolio representing 30% of sales versus 25% in previous year.
      • Dr. Reddy’s year-on-year secondary prescription sales growth at 17% versus industry’s growth of 7%. (Source: Pharmexpert MAT May 2011). Dr. Reddy’s is ranked 13th in market share.
    • Revenues in Other CIS markets grew by 9% to Rs. 533 million ($12 million) in Q1 FY12 versus Rs. 489 million ($11 million) in Q1 FY11.
  • Revenues in India increased by 6% to Rs. 2.9 billion ($66 million) in Q1 FY12 versus Rs. 2.8 billion ($62 million) in Q1 FY11.
    • 12 new products launched during the quarter
    • Strong year-on-year growth of 69% in biosimilars portfolio, now representing 7% of overall sales.
  • Revenues from Europe at Rs. 1.9 billion ($43 million) in Q1 FY12 declined marginally by 1% over previous year.
    • Revenues from Germany decreased by 9% to Rs. 1.2 billion ($ 27 million) in Q1 FY12.
      • Commencement of AOK tender supplies in June 2011.
    • Revenues from Rest of Europe grew by 15% to Rs. 710 million ($11 million) in Q1 FY12

Pharmaceutical Services and Active Ingredients (PSAI)

Revenues from PSAI are at Rs. 4.8 billion ($108 million) in Q1 FY 12 versus Rs. 4.5 billion ($101 million) in Q1 FY11, year-on-year increase of 7%.

  • Growth in Active Ingredients business led by new product launches partially offset by decline in Pharmaceutical Services business.
  • During the quarter, 9 DMFs were filed globally, with 1 in US, 1 in Europe, 1 in Canada and 6 in rest of the markets. The cumulative DMF filings as of 30th June 2011 are 495.

Income Statement Highlights:

  • Gross profit at Rs. 10.6 billion ($237 million) in Q1 FY12, margin of 53% to revenues, at a level same as that of previous year.
  • Selling, General & Administration (SG&A) expenses including amortization at Rs. 6.8 billion ($151 million) increased by 23% over Q1 FY11. This increase is on account of: a) Annual increments in manpower costs across businesses b) Higher OTC related selling & marketing costs in Russia and c) In the US, the general overhead costs of the recently acquired Bristol penicillin facility.
  • Included in the financials is a one-time charge of Rs. 136 million ($3 million) on account of a Voluntary Retirement Scheme (VRS) floated by the company.
  • R&D expenses at Rs. 1.2 billion ($27 million) in Q1 FY12, increase of 21% over Q1 FY11.
  • Net Finance costs are at Rs. 46 million ($1 million) in Q1 FY 12 versus Rs. 177 million ($4 million) in Q1 FY11. The change is on account of :
    • Net forex gain of Rs. 158 million ($4 million) versus net forex loss of Rs. 225 million ($5 million) in Q1 FY11.
    • Net interest expense of Rs. 221 million ($5 million) in Q1 FY12 versus net interest income of Rs. 9 million ($0.2 million) in Q1 FY11.
    • Profit on sale of investments of Rs. 17 million ($0.4 million) in Q1 FY12 versus Rs. 39 million ($0.9 million) in Q1 FY11.
  • Adjusted EBITDA of Rs. 4.3 billion ($97 million) in Q1 FY12, is at 22% of revenues with year-on-year growth of 27%.
  • Adjusted Profit after Tax for Q1 FY 12 is at Rs. 2.5 billion ($56 million), is at 13% of revenues with year-on-year growth of 20%.
  • Adjusted EPS for Q1 FY 12 is at Rs. 14.8 ($0.33) versus Rs. 12.3 ($0.28) in Q1 FY11.
  • Capital expenditure for Q1 FY12 is at Rs. 1.8 billion ($41 million).
Appendix 1: Key Balance Sheet Items
(in millions)
Particulars As on 30th June 11 As on 31st March 11
($) (Rs.) ($) (Rs.)
Cash and cash equivalents 123 5,468 128 5,729
Trade receivables 384 17,136 395 17,615
Inventories 390 17,401 360 16,059
Property, plant and equipment 685 30,524 665 29,642
Goodwill and Other Intangible assets 335 14,921 342 15,246
Loans and borrowings (current & non-current) 537 23,940 529 23,572
Trade payables 189 8,433 190 8,480
Equity 1,100 49,046 1,031 45,990
Appendix 2: Q1 FY12 Revenue Mix by Segment
(in millions)
Q1 FY12 Q1 FY11
Growth
%
($) (Rs.) % ($) (Rs.) %
Global Generics 323 14,424 73 267 11,917 71 21
North America 129 5,756 40 87 3,897 33 48
Europe 43 1,917 13 43 1,937 16 (1)
India 66 2,936 20 62 2,778 23 6
Russia & Other CIS 68 3,018 21 57 2,552 21 18
RoW 18 797 6 17 754 6 6
PSAI 109 4,832 24 101 4,499 27 7
North America 19 842 17 19 837 19 1
Europe 38 1,693 35 35 1,555 35 9
India 15 662 14 14 633 14 4
RoW 37 1,635 34 33 1,474 33 11
Proprietary Products and Others 12 528 3 9 415 2 74
Total 444 19,783 100 377 16,831 100 18
Appendix 3: Q1 FY12 Revenue Mix by Geography
(in millions)
Q1 FY12 Q1 FY11
Growth
%
($) (Rs.) % ($) (Rs.) %
North America 157 6,991 35 113 5,024 30 39
Europe 84 3,744 19 81 3,617 21 4
India 81 3,597 18 77 3,411 20 5
Russia & Other CIS 68 3,018 15 57 2,552 15 18
Others 55 2,433 12 50 2,228 13 9
Total 444 19,783 100 377 16,831 100 18

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